Investment between growth and development

When economist Adam Smith spoke about freeing the market from government intervention, he was asked how private companies and organisations can best maintain public interest in their behaviour and policies. He noted that the market has an internal mechanism for dealing with this. Terming it as the market’s ‘invisible hand’, he said that organisations’ efforts towards their own interest would work to greater benefit of the society in comparison to actions that were directly intended to serve public interest.
Smith’s ideas were revolutionary in the 1700s, when politics dominated economy. Economic activities were in favour of the rulers and aristocrats. Growing in power, private corporations began to replace political elites; the benefits of economic activities became theirs alone. Millions of people were denied the fruits of their hard labour. This is why the concepts of growth and development became separate, while they should be one and the same.
The link between growth and development should be the link between a creek and its river, or the link between a river and the sea it ends in. More accurately, it is the link between rain and crops. Growth is supposed to nurture development and should result on a positive impact on human competency in the service of communities and economies, regardless of how difficult the task is.
This is one of the greatest errors of previous practices, not only on a local level, but in the global economic arena as well. Private corporations have made strong profits in the past century. The channeling of these profits towards human and social development, and building an infrastructure that enables suitable forms of economic activities for each era, are limited or, in many cases, absent.
I believe we must not shy away from acknowledging the faults of our global economic system. Many voices have already been raised in this regard. Criticism, however, is different today than it was when arguments were between different economic theories — one called for nationalisation and the other for privatisation. Criticism now is in defence of humanity and the future, of how the global economy should be in terms of standards, ethics, and goals.
It is time to revise concepts that caused this error. The most important idea we must revisit is the relationship between the private sector and the government. We must identify the interests of both parties and the outcomes of their economic effort, and then steer it towards the benefit of humanity.
Privatisation has become the key to solve all problems, but we must remain conscious of the new issues it can bring forth. We live in different times unlike those when Smith freed the market from the politicians’ dominance. In this day and age, it is profoundly necessary to consider the stability and autonomy of governments and communities, and encourage a healthy synergetic relationship to promote stability. Such stability cannot be achieved without nations’ control over their own resources, and without governments leading and supervising development in their respective countries.
That is not to say that foreign investments hold any less importance. It is necessary for some countries that need foreign capital and expertise to enhance their GDP, and for all countries that seek improving their experience and expertise and integrate them with successful global ventures. A short-term policy attracting foreign investors with cheap labour and resources, and a semi tax-free environment could be detrimental in the long run. The motivations of investment in any country define the culture that will affect the outcome of said investment, and determine the level of responsibility of foreign investors to achieve social and economic development of communities where they work.
In the Sultanate of Oman, we encourage foreign investment. The most important lesson we have learned from our development experience in the Sultanate is to employ an approach that yields sustainable results, uses caution and addresses our future long-term goals. Even if progress is slow, the process must achieve stable results, not temporary ones.
Development operations must be shared and as responsibility between both public and private sectors, so resources are used optimally to contribute towards a brighter future for Oman.
Thus, we welcome foreign investments. We can promise investors that the sustainability of their investment and profit growth will be determined by the level of support their investments provide for achieving our vision toward our nation and our society. - Exclusive to Times of Oman

The author is the Chairman of National Bank of Oman, Executive Chairman of Investcorp and an International Advisor to the Brookings Instituition. All the views and opinions expressed in the article are solely those of the author and do not reflect those of Times of Oman